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Wal-Mart’s Indian Adventure

Mumbai Killing time in the Delhi airport on the way to Mumbai, my eye caught the cover of a Forbes – India magazine with a huge headline: “Wal-Mart’s Billion Dollar Baby.” The India FDI Watch Campaign is still determined around these issues, so I was curious how the company was spinning their joint venture with Bharti these days.

Wal-Mart is amazing. You take your eye off the company for a minute, and it explodes on you. Gross sales are now over $400 billion annually. The company has to add $8 billion, just to grow by 2%. But, I digress, because public relations though all of this clearly was, there were nuggets of real interest.

They concede that pure, legitimate “cash-and-carry” or full-on wholesale operations, which is their only legal entry point within the foreign direct investment (FDI) rules in India is a first for them. Even Sam’s in the US is a hybrid of individual member/customers and business/wholesale purchasers. In India the entire focus of their market is the birana or mom-and-pop stores that proliferate in India.

Although the company makes a big distinction about having changed from being “an American company that works overseas” to being a truly “international” or global enterprise, meaning that they are finally trying to really understand and adapt fully to local markets, a lot of this still seems the same. The distribution centers are still central and are 150 kilometers from all of the stores, almost exactly the US model except a little closer probably given the roads and traffic conditions in India. Not surprisingly then all 27 stores put together so far are in northern India, largely the Punjab, though I noticed 4 have slipped into the Delhi suburbs as well. 95% of the suppliers are bar coded into the famous distribution routing system that Wal-Mart has virtually patented in the US as well.

On the other hand in order to keep some items fresh, like spinach, Wal-Mart in India is taking some supplier deliveries right at the store, which is pretty unique for them, since it also involves some pretty small traders. But, it’s smart and moves them closer to the ground. In fact the whole operation seems closer to the ground and more focused, though that’s part of the sweetness of the spin as well, I’m sure.

Other parts of the model are consistent. Keeping land costs cheap (and political opposition down) they are buying on the outskirts of the cities where they operate. The physical space is spare and constructed with skylights so that they don’t even have to turn on the lights until after 6 PM at night. Not only is that smart, but given power supply problems throughout India, it also keeps them up and running, though anything that slows the computer tracking system is heck to pay.

I got my 50 rupees worth. I put down the magazine thinking that perhaps Wal-Mart did have a future, if they could embrace and focus within wholesale and be “value-added.” Unfortunately when you have to grow by $8 B to add 2%, simple growth is never enough. The number of 1000 stores slipped out in one management interview. Hard to get that number just on “cash-and-carry.” Hard to believe that this isn’t the honeymoon with many rocky days to come still in their Indian adventure, many of which will continue to threaten India greatly.